For many Canadian parents, passing down a property to their adult children is a significant milestone. It’s a way to provide financial security for their loved ones and to ensure their legacy lives on. But transferring property is not always a straightforward process.
There are various legal, financial, and tax-related considerations to weigh. So before employing estate documentation services, here’s how parents can pass down property to their adult children while minimizing tax implications and providing financial security:
Prepare Deed of Gift
Deed of Gift enables parents to transfer ownership of their property to their adult child, receiving no money in return. It’s essential to note that once the Deed of Gift is executed, parents relinquish all ownership and control of the property. Therefore, it’s crucial to ensure that parents are financially secure and have other assets to rely on.
It’s also worth noting that transferring ownership through a Deed of Gift is considered a disposition for tax purposes. Therefore, parents may be subject to capital gains tax if the property has increased in value since they acquired it.
Include Adult Child in Legal Title
Legal title is often used when parents want to maintain some control over the property while still providing their adult child with ownership rights. Parents create a joint tenancy by adding the child’s name to the title. If one owner passes away, the surviving owner automatically inherits the property.
If you are considering adding the name of your adult child to the title of your property, always consider the tax implications. This action is considered a gift, so parents may be subjected to the gift tax. Furthermore, if the property is eventually sold, parents and the adult child must pay capital gains tax according to their share of the property.
Establish an Inter Vivos Trust
An inter vivos trust is a legal arrangement wherein parents transfer property ownership to a trustee to benefit their grown child. The trustee oversees the property and disburses the income to the adult child per the trust agreement. This approach grants parents greater authority over the property and guarantees financial assistance for their adult child.
One of the significant benefits of an inter vivos trust is that it can minimize tax implications. Since the trust owns the property, it’s not considered part of the parent’s estate for tax purposes. Additionally, the trustee can distribute income to minimize tax liability for the adult child.
Mention Under Parent’s Last Will and Testament
Having a last will and testament allows parents to modify their plans should their situation change. It is also a reliable method to guarantee that their assets are allocated according to their desires.
When passing down property through a will, it’s essential to provide explicit instructions to avoid confusion or disputes. Parents should consult an estate documentation service provider to ensure their will is legally binding and complies with all relevant laws.
Final Thoughts
Passing a property to adult children is a significant milestone for many Canadian parents. However, it’s crucial to consider each method’s legal, financial, and tax implications.
Consulting with an estate documentation service provider can help parents navigate the complexities of transferring property and ensure their wishes are fulfilled. Whatever method they choose, parents can provide their adult children with financial security and ensure their legacy lives on.
Secure your legacy with estate documentation services from Getting Your Affairs in Order. Our team of experts will guide you through safeguarding your assets and distributing them to your loved ones. Trust us to provide comprehensive and personalized solutions for peace of mind. Contact us today to schedule your appointment.
